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SHARE-BASED COMPENSATION | 12 Months Ended
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Dec. 31, 2022
Share-based Payment Arrangement [Abstract] |
SHARE-BASED COMPENSATION | NOTE 6 - SHARE-BASED COMPENSATION
1) | Share-based compensation plan
On March 17, 2013, the Company's Board of Directors approved a Share Incentive Plan (the “2013 Plan”). Under the 2013 Plan, the Company reserves specified number of ordinary shares for allocation to stock options (each, an “Option”), restricted share units, restricted share awards and performance-based awards, that had been awarded to employees and non-employees under the 2013 Plan. Each Option is exercisable for one ordinary share. Any Option granted under the 2013 Plan that is not exercised within six years from the date upon which it becomes exercisable will expire. Since adopting the 2018 Plan (as defined below), the Company has not granted any awards under the 2013 Plan. On July 2, 2018, the Company's Board of Directors and shareholders of the Company approved a new Share Incentive Plan (the “2018 Plan”) and reserved 1,371,398 ordinary shares for allocation to stock options (each, a "2018 Plan Option"), restricted share units, restricted share awards and performance-based awards, to employees and non-employees for issuance under the 2018 Plan. Each 2018 Plan Option is exercisable for one ordinary share. Any 2018 Plan Option that is not exercised within 10 years from the date of grant will expire. The 2018 Plan Options granted to employees are subject to the terms stipulated by section 102(b)(2) of the Israeli Income Tax Ordinance (the “Ordinance”). According to these provisions, the Company will not be allowed to claim as an expense for tax purposes the amounts credited to the employees as a capital gain benefit in respect of the options granted. 2018 Plan Options granted to related parties or non-employees of the Company are governed by Section 3(i) of the Ordinance or Non-Qualified Share Options ("NSO"). The Company will be allowed to claim as an expense for tax purposes in the year in which the related parties or non-employees exercised the options into shares. As of December 31, 2022, 922,080 ordinary shares remain available for future grants under the 2018 Plan. On January 2, 2023, the Company’s Board of Directors approved an increase of 1,440,496 ordinary shares that may be issued under the Company’s 2018 Plan pursuant of the terms of the 2018 Plan,
2) | share-based compensation grants to employees and directors:
| a) | On January 4, 2021, options to purchase 1,314,218 ordinary shares were granted to the Company’s former Chief Executive Officer, Dr. Spiros Jamas with an exercise price of $1.24 per share. Prior to the terms of Dr. Jamas’ separation agreement (as described below), the options were to vest over four years from the date of grant; 25% vest on the first anniversary of the date of grant and the remaining 75% of the option to vest in twelve equal quarterly installments following the first anniversary of the grant date. The grant was subject to the approval by the Company’s shareholders, which approved the grant in March 2021. The fair value of the options at the date of grant was $1,320.
On July 15, 2022, the Company entered into a mutual separation agreement with Dr. Jamas. Pursuant to the separation agreement, Dr. Jamas received the following benefits: (i) a one-time lump sum payment of his annual base salary for a period of 13 months, for a total gross amount equal to $412; and (ii) an extension of the exercise period for the vested portion of the options granted on January 4, 2021, based on the award original terms, representing an aggregate of 492,832 ordinary shares, through the end of a two-year period commencing on July 15, 2022. Effective July 15, 2022, upon termination of the employment agreement with Dr. Jamas, the remaining 821,386 unvested options were forfeited and recognized as a reverse of expense of $457 in general and administrative expenses.
| b) | On April 7, 2021, the Company’s Board of Directors approved the following option grants:
| i. | Option grants to purchase 213,000 ordinary shares to certain employees and 70,000 options granted to service providers, with an exercise price of $3.61 per share. The options vest over four years from the date of grant; 25% vest on the first anniversary of the date of grant and the remaining 75% of the option will vest in twelve equal quarterly installments following the first anniversary of the grant date. The fair value of the options at the date of grant was $646.
| ii. | Options grant to purchase 33,368 ordinary shares to a non-executive director of the Company, with an exercise price of $3.61. The options will vest over three years in twelve equal quarterly instalments starting on the vesting commencement date. These options were subject to the approval of the shareholders of the Company, which was approved on October 4, 2021. The fair value of the options at the shareholders' approval date was $104.
| c) | On April 21, 2021, options to purchase 345,000 ordinary shares were granted to several executive officers of the Company, with an exercise price of $3.15. The options vest over four years from the date of grant; 25% vest on the first anniversary of the date of grant and the remaining 75% of the option will vest in twelve equal quarterly installments following the first anniversary of the grant date. These options were subject to the approval of the shareholders of the Company, which was approved on October 4, 2021. The fair value of the options at the shareholders' approval date was $1,140.
| d) | On August 23, 2021, the Company’s Board of Directors approved the following option grants which were approved by the shareholders of the Company on October 4, 2021.
| i. | Grants of options to purchase ordinary shares with a total fair value 0f $195 for each of the seven non-executive board members on January 1, 2022. The options will vest over three years in twelve equal quarterly instalments starting on January 1, 2022 the vesting commencement date. On January 1, 2022, which is considered the awards grant date, the Company granted 752,899 ordinary shares to non-executive directors with an exercise price of $2.815 per share.
| ii. | Grants of options to purchase ordinary shares with a total fair value 0f $65 for each of the seven non-executive board members on January 1, 2022. The options will vest over one year in four equal quarterly instalments starting on January 1, 2022 the vesting commencement date. On January 1, 2022, which is considered the awards grant date, the Company granted 250,964 ordinary shares to non-executive directors with an exercise price of $2.815 per share.
| e) | On March 31, 2022, the Company’s Board of Directors approved the following option grants:
| i. | Options to purchase 80,000 ordinary shares to an executive officer and a service provider, in each case, with an exercise price of $2.86 per share. The fair value of the options was $147.
| ii. | Options to purchase 55,000 ordinary shares to certain executive officers with an exercise price of $2.86 per share. This grant was subject to shareholders' approval, which was obtained at a meeting of the Company’s shareholders held on September 7, 2022. The fair value of the options was $37. The options vest over four years from the date of grant; 25% vest on the first anniversary of the date of grant and the remaining 75% of the option will vest in twelve equal quarterly installments following the first anniversary of the grant date.
| f) | On April 28, 2022, the Company’s Board of Directors approved option grants to purchase 220,000 ordinary shares to employees with an exercise price of $2.57 per share. The options vest over four years from the date of grant; 25% vest on the first anniversary of the date of grant and the remaining 75% of the option will vest in twelve equal quarterly installments following the first anniversary of the grant date. The fair value of the options was $364.
| g) | On May 11, 2022, the Company’s Board of Directors approved a grant of options to purchase 500,000 ordinary shares to Ms. Miranda Toledano, who was serving as the Company’s Chief Financial Officer at the time of the grant. Ms. Toledano has since been appointed the Company’s Chief Executive Officer (as described in Note 6(2)l below). This grant was subject to shareholders' approval, which was obtained at a meeting of the Company’s shareholders held on September 7, 2022. These options have an exercise price of $2.00 per share and vest over four years from the date of grant; 25% vest on the first anniversary of the date of grant and the remaining 75% of the option will vest in twelve equal quarterly installments following the first anniversary of the grant date. The fair value of the options was $390.
| h) | On July 15, 2022, the Company’s Board of Directors appointed Ms. Miranda Toledano as the Company’s Chief Executive Officer and approved a grant of options to purchase 600,000 ordinary shares at an exercise price of $1.40 per share, which are in addition to the options described in note 6(2)k above. This grant was subject to shareholders' approval, which was obtained at a meeting of the Company’s shareholders held on September 7, 2022. The options vest over four years from the date of grant; 25% vest on the first anniversary of the date of grant and the remaining 75% of the option will vest in twelve equal quarterly installments following the first anniversary of the applicable grant date. The fair value of the options was $524.
In addition, upon the occurrence of a Triggering Event (as defined below) and subject to the approval of the Board of Directors, Ms. Toledano will be granted additional options to purchases 200,000 ordinary shares. The exercise price will be determined at the time of the Board of Directors’ approval. "Triggering Event" means the earlier of the following events: (i) the execution by the Company of a binding strategic or partnership agreement with a strategic partner to fund the Company's Phase III FDA Trial; or (b) raising sufficient funding to complete the Company's Phase III FDA Trial, in each case as such event is approved by the Board of Directors.
| i) | On June 15, 2022, the Company entered into a separation agreement with Dr. Phillip Schwartz, the Company’s former President of R&D, under which Dr. Schwartz agreed to continue to provide services to the Company until July 21, 2022 (the “Separation Date”). Pursuant to the terms of the separation agreement, which were approved by the Company’s shareholders on September 7, 2022, Dr. Schwartz received a full acceleration of his unvested options, as of the Separation Date, to purchase 68,750 ordinary shares granted in April 2021 that otherwise would have been forfeited. These options, together with 31,250 already vested options granted in April 2021 and 357,500 already vested options to purchase ordinary shares granted in 2017, will be exercisable for a period of 10 years from their respective initial grant dates.
The acceleration described above was recognized as a "Type III" modification; therefore, on the shareholder approval date, the Company recognized the incremental costs of unvested options based on the fair value of the options on such date. In addition, the extension of the exercise period for the vested awards was recognized as a "Type I" modification. The total expense amount was $112 thousand, which was classified as additional share-based compensation costs in the research and development expenses. In addition, the separation agreement provides for the following payments to Dr. Schwartz, all of which would have otherwise been payable in accordance with either Israeli law or pursuant to his existing employment agreement: a one-time cash separation payment in an amount equal to NIS 537,600 (approximately $156) and additional payments of NIS 737,771 (approximately $214) in respect of all other ongoing accrued benefits, subject to any mandatory deductions. The foregoing payments were recognized in the research and development expenses. The fair value of each option granted is estimated at the date of grant using the Black-Scholes option-pricing model, with the following weighted average assumptions:
|  | 2022 |  |  | 2021 |
Exercise price |  |  | $1.40-$2.86 |  |  |  | $1.24-$3.61 |
Dividend yield |  |  | - |  |  |  | - |
Expected volatility |  |  | 69%-70.2% |  |  |  | 68%-71% |
Risk-free interest rate |  |  | 1.35%-3.36% |  |  |  | 1.11%-0.94% |
Expected life - in years |  |  | 5.5-6.5 |  |  |  | 6.1-5.8 |
|  | 2022 |  |  | 2021 |
|  | Number of options |  |  | Weighted average exercise price |  |  | Number of options |  |  | Weighted average exercise price |
Outstanding at beginning of the year |  |  | 4,316,859 |  |  | $ | 3.63 |  |  |  | 2,570,109 |  |  | $ | 4.85 |
Granted |  |  | 2,458,863 |  |  |  | 2.29 |  |  |  | 1,975,586 |  |  |  | 1.95 |
Exercised |  |  | (5,511 | ) |  |  | 2.14 |  |  |  | (177,710 | ) |  |  | 2.37 |
Forfeited |  |  | (902,009 | ) |  |  | 1.41 |  |  |  | (16,660 | ) |  |  | 2.37 |
Expired |  |  | (135,115 | ) |  |  | 3.80 |  |  |  | (34,466 | ) |  |  | 4.00 |
Outstanding at end of the year |  |  | 5,733,087 |  |  | $ | 3.30 |  |  |  | 4,316,859 |  |  | $ | 3.63 |
Exercisable at end of the year |  |  | 3,165,677 |  |  | $ | 4.06 |  |  |  | 2,068,067 |  |  | $ | 5.39 |
The following tables summarizes information concerning outstanding and exercisable options as of December 31, 2022, in terms of ordinary shares:
December 31, 2022 |
Options outstanding |  |  | Options exercisable |
|  |  | Number of |  |  | Weighted |  |  | Number of |  |  | Weighted |
|  |  | options |  |  | Average |  |  | options |  |  | Average |
Exercise |  |  | outstanding |  |  | Remaining |  |  | exercisable |  |  | Remaining |
prices per |  |  | at end of |  |  | Contractual |  |  | at end of |  |  | contractual |
share (USD) |  |  | Year |  |  | Life |  |  | year |  |  | Life |
| - |  |  |  | 1,560 |  |  |  | 0.09 |  |  |  | 1,560 |  |  |  | 0.09 |
| 1.24 |  |  |  | 492,831 |  |  |  | 1.54 |  |  |  | 492,831 |  |  |  | 1.54 |
| 1.40 |  |  |  | 600,000 |  |  |  | 9.54 |  |  |  | - |  |  |  | - |
| 2.02 |  |  |  | 500,000 |  |  |  | 9.37 |  |  |  | - |  |  |  | - |
| 2.14 |  |  |  | 400,775 |  |  |  | 7.26 |  |  |  | 277,994 |  |  |  | 7.26 |
| 2.53 |  |  |  | 33,638 |  |  |  | 6.89 |  |  |  | 33,638 |  |  |  | 6.89 |
| 2.57 |  |  |  | 205,500 |  |  |  | 9.33 |  |  |  | - |  |  |  | - |
| 2.815 |  |  |  | 1,003,863 |  |  |  | 9.01 |  |  |  | 376,447 |  |  |  | 9.01 |
| 2.86 |  |  |  | 135,000 |  |  |  | 9.25 |  |  |  | - |  |  |  | - |
| 3.15 |  |  |  | 345,000 |  |  |  | 8.30 |  |  |  | 123,125 |  |  |  | 8.30 |
| 3.61 |  |  |  | 250,868 |  |  |  | 8.27 |  |  |  | 101,059 |  |  |  | 8.27 |
| 3.68 |  |  |  | 294,580 |  |  |  | 0.26 |  |  |  | 294,580 |  |  |  | 0.26 |
| 3.97 |  |  |  | 247,082 |  |  |  | 6.05 |  |  |  | 242,053 |  |  |  | 6.05 |
| 6.31 |  |  |  | 1,222,390 |  |  |  | 3.08 |  |  |  | 1,222,390 |  |  |  | 3.08 |
|  |  |  |  | 5,733,087 |  |  |  |  |  |  |  | 3,165,677 |  |  |  |  |
The aggregate intrinsic value of the total of the outstanding and exercisable options as of December 31, 2022, is $1. The following table illustrates the effect of share-based compensation on the statements of operations:
|  | 2022 |  |  | 2021 |
Cost of revenues |  |  | 14 |  |  |  | 102 |
Research and development expenses |  |  | 708 |  |  |  | 661 |
General and administrative |  |  | 1,525 |  |  |  | 1,098 |
|  |  | 2,247 |  |  |  | 1,861 |

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